March 11, 2004, Introduced by Senator BISHOP and referred to the Committee on Banking and Financial Institutions.
A bill to amend 1956 PA 218, entitled
"The insurance code of 1956,"
by amending sections 408, 410, and 1920 (MCL 500.408, 500.410,
and 500.1920), sections 408 and 410 as amended by 1998 PA 457 and
section 1920 as amended by 1994 PA 228.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
1 Sec. 408. (1) To qualify for authority to transact
2 insurance in this state a domestic, foreign, or alien insurer
3 shall possess and thereafter maintain paid-in capital or surplus
4 or assets in amounts that are not less than those shown by the
5 applicable portion of the following schedule:
1 Kind of insurance Domestic, foreign Domestic, foreign Domestic, foreign Alien insurers
2 stock insurers mutual life insurers mutual insurers United States
3 CAPITAL SURPLUS other than life ASSETS
4 ASSETS
5 Life $200,000.00 $200,000.00 not applicable $200,000.00
6 Life and disability 300,000.00 300,000.00 not applicable 300,000.00
7 Disability, except as
8 provided in subsection
9 (2), (3), or (4) 200,000.00 not applicable $ 50,000.00 200,000.00
10 Property & marine 200,000.00 not applicable 50,000.00 200,000.00
11 Automobile 200,000.00 not applicable 50,000.00 200,000.00
12 Casualty 200,000.00 not applicable 50,000.00 200,000.00
13 Surety & fidelity 250,000.00 not applicable 250,000.00 250,000.00
14 Surety, fidelity, casualty 450,000.00 not applicable 250,000.00 450,000.00
15 ________________________________________________________________________________________________________________________
16 Kind of insurance Reciprocal
17 insurers
18 ASSETS
19 Disability, except as
20 provided in subsection
21 (2), (3), or (4) $50,000.00
22 Property & marine 50,000.00
23 Automobile 50,000.00
24 Casualty 50,000.00
25 Surety & fidelity 50,000.00
26 Surety, fidelity, casualty 50,000.00
1 Multiple lines: Any insurer may reinsure risks of every kind
2 or description and write any and all kinds of insurance other
3 than life insurance for which it is authorized while it maintains
4 paid-up capital and surplus of not less than $500,000.00.
5 (2) An insurer authorized to transact casualty insurance
6 shall also have authority to transact disability insurance
7 without additional capital, surplus, or assets, as the case may
8 be.
9 (3) A domestic stock insurer organized to insure on the
10 monthly or weekly premium payment plan any person against bodily
11 injury or death by accident or against disability on account of
12 sickness, or to provide a cash funeral benefit not exceeding
13 $500.00, shall have paid-in capital stock of not less than
14 $25,000.00.
15 (4) As to a reciprocal insurer the authority to transact
16 disability insurance, either alone or in combination with other
17 insuring powers, does not include authority to transact health
18 insurance.
19 (5) Financial requirements as to cooperative assessment life,
20 disability, and loss of position insurers, as identified in
21 chapter 64, shall be as provided in that chapter. Financial
22 requirements as to domestic stock insurers formed to insure
23 railway employees against loss of position, to transact
24 disability and life insurance, and to make annuities as
25 identified in section 6604 shall be as provided in section 6608.
26 (6) This section
applies to domestic insurers organized
27 prior to July 21, 1965
and to foreign and alien insurers not
1 subject to the
provisions of section 410. However, a domestic
2 insurer organized
prior to July 21, 1965 and any foreign or alien
3 insurer not subject to
the provisions of section 410 that attains
4 the level of capital
and surplus required by section 410(1), (2),
5 or (3) is required
thereafter to maintain that level of capital
6 and surplus under
section 410 unless the direct premiums written
7 and any reinsurance
assumed by the insurer in an annual period
8 are less than the
insurer's surplus.
9 (7) An insurer
authorized to transact insurance on or after
10 July 21, 1965 and before January 1, 1999 that attains the level
11 of capital and surplus
required by section 410(2) is required
12 thereafter to maintain
that level of capital and surplus under
13 section 410 unless the
direct premiums written and any
14 reinsurance assumed by
the insurer in an annual period are less
15 than the insurer's
surplus.
16 (6) (8) Notwithstanding
the specific requirements of this
17 section, domestic, foreign, and alien insurers shall also comply
18 with the standard set
forth in section 403 any additional
19 capital, surplus, or asset requirements that may apply under
20 section 403 or 410.
21 Sec. 410. (1) To qualify for and maintain authority to
22 transact insurance in this state on or after July 21, 1965 and
23 before January 1, 1999, a domestic, foreign, or alien insurer
24 shall possess and thereafter maintain unimpaired capital and
25 surplus in an amount determined adequate by the commissioner to
26 continue to comply with section 403 but not less than
27 $1,000,000.00. The commissioner shall take into account the risk
1 based capital requirements as developed by the national
2 association of insurance commissioners in order to determine
3 adequate compliance with section 403.
4 (2) To qualify for and maintain authority to transact
5 insurance in this state on or after January 1, 1999, a domestic,
6 foreign, or alien insurer shall possess and thereafter maintain
7 unimpaired capital and surplus in an amount determined adequate
8 by the commissioner to continue to comply with section 403 but
9 not less than $7,000,000.00. The commissioner shall take into
10 account the risk based capital requirements as developed by the
11 national association of insurance commissioners in order to
12 determine adequate compliance with section 403.
13 (3) In addition to the minimum capital and surplus specified
14 in subsections (1) and (2), an insurer applying for an initial
15 certificate of authority after July 21, 1965 in this state shall
16 possess and maintain surplus or additional surplus in an amount
17 determined by the commissioner adequate to comply with section
18 403 for the kind or kinds of insurance it writes or proposes to
19 write, but in no
event not less than $500,000.00.
20 (4) Except as provided by section 407, every insurer
21 authorized to transact insurance in this state may transact life
22 insurance or property insurance but not both, unless it was
23 authorized to transact such other kind or kinds of insurance in
24 this state immediately prior to January 1, 1965. For the purpose
25 of this section, life insurance includes any 1 or more of the
26 insurances described in sections 602 and 606; property insurance
27 includes any 1 or more of the insurances described in chapter 6,
1 excepting only section 602 and those provisions of section 632
2 that apply to insurances described in section 602. Nothing in
3 this section shall be construed to broaden the authority of
4 reciprocal insurers.
5 (5) Except as provided in subsection (7), an insurer
6 authorized to transact insurance prior to July 21, 1965 may
7 continue to transact insurance so long as it maintains the
8 minimum financial requirements of section 408. However, an
9 insurer authorized to transact insurance prior to July 21, 1965,
10 that attains the level of minimum capital and surplus required by
11 subsection (1) shall
maintain compliance with this section at
12 least that minimum level unless the insurer satisfies either of
13 the following:
14 (a) The direct
premiums written and minus any reinsurance
15 assumed ceded by the insurer to 1 or more
authorized reinsurers
16 in an annual period are less than the insurer's surplus.
17 (b) The commissioner finds all of the following:
18 (i) The insurer's total capital exceeds 2 times the company's
19 authorized control level.
20 (ii) The insurer's certificate of authority has not been
21 suspended, revoked, or limited under section 436 at any time
22 during the 5-year period immediately preceding the date the
23 insurer files a plan as required under subparagraph (v).
24 (iii) The amount of capital and surplus is not less than the
25 amount possessed by the insurer at the time it was incorporated
26 under this act.
27 (iv) The insurer is otherwise safe, reliable, and entitled to
1 public confidence.
2 (v) The insurer files a plan with the commissioner outlining
3 the steps it will take to increase its capital and surplus to at
4 least the minimum required by subsection (2) within a period of
5 time specified in the plan and approved by the commissioner. The
6 plan shall remain in effect for the period specified in the plan
7 unless either the insurer attains the minimum capital and surplus
8 required by subsection (2) or the commissioner determines that a
9 change in the insurer's financial condition has rendered the
10 insurer no longer safe, reliable, and entitled to public
11 confidence. If the insurer fails to attain the minimum capital
12 and surplus required by subsection (2) within the time frame
13 specified in the plan, the insurer is subject to rehabilitation
14 or liquidation.
15 (6) Except as provided in subsection (7), an insurer
16 authorized to transact insurance on or after July 21, 1965 and
17 before January 1, 1999 that attains the level of minimum capital
18 and surplus required by
subsection (2) shall maintain compliance
19 with this section at least that minimum level unless the insurer
20 satisfies either of the following:
21 (a) The direct
premiums written and minus any reinsurance
22 assumed ceded by the insurer to 1 or more
authorized insurers
23 in an annual period are less than the insurer's surplus.
24 (b) The commissioner finds all of the following:
25 (i) The insurer's total capital exceeds 2 times the company's
26 authorized control level.
27 (ii) The insurer's certificate of authority has not been
1 suspended, revoked, or limited under section 436 at any time
2 during the 5-year period immediately preceding the date the
3 insurer files a plan as required under subparagraph (v).
4 (iii) The amount of capital and surplus is not less than the
5 amount possessed by the insurer at the time it was incorporated
6 under this act.
7 (iv) The insurer is otherwise safe, reliable, and entitled to
8 public confidence.
9 (v) The insurer files a plan with the commissioner outlining
10 the steps it will take to increase its capital and surplus to at
11 least the minimum required by subsection (2) within a period of
12 time specified in the plan and approved by the commissioner. The
13 plan shall remain in effect for the period specified in the plan
14 unless either the insurer attains the minimum capital and surplus
15 required by subsection (2) or the commissioner determines that a
16 change in the insurer's financial condition has rendered the
17 insurer no longer safe, reliable, and entitled to public
18 confidence. If the insurer fails to attain the minimum capital
19 and surplus required by subsection (2) within the time frame
20 specified in the plan, the insurer is subject to rehabilitation
21 or liquidation.
22 (7) An insurer shall not be authorized to transact legal
23 expense insurance unless it meets the capital and surplus
24 requirements of subsections (1), (2), and (3).
25 (8) Notwithstanding the specific requirements of this
26 section, domestic, foreign, and alien insurers shall also comply
27 with the standard set
forth in section 403 any additional
1 capital, surplus, or asset requirements that may apply under
2 section 403 or 410.
3 Sec. 1920. (1) A licensee shall offer surplus lines
4 insurance only to insurers that are in a stable and unimpaired
5 financial condition. An insurer recognized by the commissioner
6 as an eligible surplus lines insurer pursuant to subsection (2)
7 shall be considered to meet the requirements of this subsection.
8 Recognition as an eligible surplus lines insurer shall be
9 conditioned upon the insurer's continued compliance with this
10 chapter and rules promulgated under this chapter.
11 (2) An unauthorized insurer may apply for recognition as an
12 eligible surplus lines insurer by filing an application in the
13 form and with the information as reasonably required by the
14 commissioner regarding the insurer's financial stability,
15 reputation, and integrity. The commissioner may delegate to an
16 association the power to process and to make recommendations on
17 applications for recognition as an eligible surplus lines
18 insurer. Notwithstanding a delegation by the commissioner, an
19 applicant may file an application for recognition directly with
20 the commissioner.
21 (3) The commissioner shall recognize an insurer making an
22 application in accordance with subsection (2) as an eligible
23 surplus lines insurer if he or she is satisfied that the insurer
24 is in a stable and unimpaired financial condition and that the
25 insurer is qualified to provide coverage in compliance with this
26 chapter. If filed with full supporting documentation before July
27 1 of any year, an application submitted under subsection (2)
1 shall be acted upon by the commissioner before December 31 of the
2 year of submission.
3 (4) The commissioner shall not recognize an insurer as an
4 eligible surplus lines insurer unless the insurer continuously
5 maintains capital and
surplus of at least $1,500,000.00 the
6 amount required by section 410(2), and is safe, reliable, and
7 entitled to public confidence. This subsection shall not be
8 construed to require an alien insurer to file financial
9 statements in the form required of authorized insurers under
10 section 438. However, each alien applicant shall have current
11 financial data filed with the national association of insurance
12 commissioners.
13 (5) If the commissioner considers it necessary, he or she may
14 request information about or examine the affairs of any eligible
15 unauthorized insurer, at the expense of the insurer except as
16 provided in sections 1905 and 1951, to determine whether the
17 insurer should continue to remain on the list of eligible surplus
18 lines insurers. If the commissioner finds that it is in the
19 public interest to remove an insurer from the list because the
20 insurer no longer meets the requirements of this chapter or is no
21 longer qualified to provide coverage under this chapter, the
22 commissioner shall do so without the necessity of a hearing.